Methods and vehicles utilizing financial instruments for funding retained obligations

Abstract

A method and vehicle for finding retained obligations in accordance with the principles of the present invention comprises pooling of investments from investors in an investment vehicle. No single investor's assets will be traced in any manner, including for purposes of measuring or allocating gain or loss. The investors share any gain or loss in accordance with their interest in the investment vehicle. The investment vehicle invests its assets with a preference for financial instruments of one or more interest holders of the investors; provided, that there is no requirement that the investment vehicle must buy a specific amount of any interest holders' financial instruments, or buy any interest holders' financial instruments at any specific time and the investment vehicle will not guarantee that a specific amount of contribution in the investment vehicle will equal a specific investment in financial instruments of an interest holder. The holding of financial instruments of any single interest holder does not make up a significant portion of the total investment of the investment vehicle. In one preferred embodiment, the method and vehicle for funding retained obligations in accordance with the present invention is directed to an investment vehicle for captive insurance companies, where the investment vehicle preferably invests in the financial instruments of a policyholder or the ultimate parent and/or subsidiaries and/or affiliates of a captive insurance company.

1 . A method for funding retained obligations comprising:
 pooling of investments from at least two investors;   establishing a preference for investing in at least one financial instrument of an interest holder of an investor;   not tracing assets of an investor for purposes of measuring or allocating gain or loss; and   ensuring that the holding of financial instruments of any single interest holder does not make up a significant portion of the total investment of the investment vehicle.   
   
   
       2 . The method for funding retained obligations of  claim 1  further wherein pooling of investments from the investors comprises establishing at least one trust that is owned by at least one investor. 
   
   
       3 . The method for funding retained obligations of  claim 1  further wherein pooling of investments from at least two investors comprises establishing an entity that qualifies as a domestic limited partnership and is owned by the investors. 
   
   
       4 . The method for funding retained obligations of  claim 1  further including investing in at least one financial instrument of an interest holder selected from a group comprising a policyholder of the investor, a direct or indirect parent of the investor, a subsidiary of the investor, a subsidiary or affiliate of the direct or indirect parent, a trust formed by the investor, affiliates of the investor, and combinations thereof. 
   
   
       5 . The method for funding retained obligations of  claim 1  further including funding the investment vehicle by investment from a captive insurance company. 
   
   
       6 . The method for funding retained obligations of  claim 5  further including investing with a preference for at least one financial instrument of an interest holder of a captive insurance company. 
   
   
       7 . The method for funding retained obligations of  claim 5  further including a parent of the captive insurance company capitalizing and owning the captive insurance company. 
   
   
       8 . The method for funding retained obligations of  claim 5  further including the captive insurance company insuring the property and casualty risks of the interest holder. 
   
   
       9 . The method for funding retained obligations of  claim 5  further including the captive insurance company insuring the property and casualty risks of subsidiaries or affiliates or both of the interest holder. 
   
   
       10 . The method for funding retained obligations of  claim 5  further including paying arm's length premiums to the captive insurance company for insurance. 
   
   
       11 . The method for finding retained obligations of  claim 5  further including the interest holder transferring sufficient independent, uncorrelated risks to the captive insurance company so that a risk distribution is present. 
   
   
       12 . The method for funding retained obligations of  claim 5  further including not offsetting a liability of an interest holder for at least one financial instrument issued against an investment of the interest holder in a captive insurance company in the financial statements of the interest holder. 
   
   
       13 . The method for funding retained obligations of  claim 5  further including neither the interest holder nor the investment vehicle consolidating for financial reporting purposes. 
   
   
       14 . The method for funding retained obligations of  claim 5  further including a parent of the captive insurance company forming both a captive insurance company and a subsidiary or subsidiaries. 
   
   
       15 . The method for funding retained obligations of  claim 5  further including an interest holder of the captive insurance company purchasing a policy of insurance from a commercial insurer and the commercial insurer investing in the investment vehicle. 
   
   
       16 . The method for funding retained obligations of  claim 1  further including not offsetting a liability of the interest holder for at least one financial instrument issued against an investment of the interest holder in a captive insurance company in the financial statements of the interest holder. 
   
   
       17 . The method for funding retained obligations of  claim 1  further including not offsetting a liability of the interest holder for at least one financial instrument issued against an investment of the captive insurance company in the investment vehicle in the financial statements of the interest holder. 
   
   
       18 . The method for finding retained obligations of  claim 1  further including funding the investment vehicle by investment from a Rabbi Trust. 
   
   
       19 . The method for funding retained obligations of  claim 1  further including funding the investment vehicle by investment from a voluntary employee benefit association. 
   
   
       20 . The method for funding retained obligations of  claim 1  further including funding the investment vehicle by investment from a deferred compensation plan. 
   
   
       21 . The method for funding retained obligations of  claim 1  further including investing in at least one financial instrument selected from the group comprising debt, equity, other financial instruments, and combinations thereof. 
   
   
       22 . The method for funding retained obligations of  claim 1  further including investing in debt of the interest holder of an investor. 
   
   
       23 . The method for funding retained obligations of  claim 22  further including investing in a highly rated debt instrument of an interest holder of an investor. 
   
   
       24 . The method for funding retained obligations of  claim 22  further including investing in short-term debt of the interest holder of an investor. 
   
   
       25 . The method for funding retained obligations of  claim 1  further including ensuring that the investment of the investment vehicle is not more risky than what it would otherwise be without the preference for the interest holders of the investors in the investment vehicle. 
   
   
       26 . The method for funding retained obligations of  claim 25  further including investing in at least one appropriately rated financial instrument. 
   
   
       27 . The method for funding retained obligations of  claim 1  further including ensuring that the investment vehicle is purchasing at least one financial instrument at an arm's length price and that the investment vehicle is seen to be in the business of trading financial instruments rather than in the financing business. 
   
   
       28 . The method for funding retained obligations of  claim 27  further including investing in at least one financial instrument of an interest holder on the same terms and conditions under which an unrelated third party can invest in the financial instrument. 
   
   
       29 . The method for funding retained obligations of  claim 1  further including ensuring that a market exists for the financial instrument so that the investment is liquid. 
   
   
       30 . The method for funding retained obligations of  claim 29  further including investing in at least one financial instrument of an interest holder in which at least one third party has also invested. 
   
   
       31 . The method for funding retained obligations of  claim 1  further including investing in at least one financial instrument of an entity unrelated to the investors. 
   
   
       32 . The method for funding retained obligations of  claim 1  further including investing in an entity that invests in at least one financial instrument of an interest holder of the investors. 
   
   
       33 . The method for funding retained obligations of  claim 1  further including purchasing at least one financial hedge. 
   
   
       34 . The method for funding retained obligations of  claim 33  further including purchasing at least one option to purchase at least one financial hedge. 
   
   
       35 . The method for funding retained obligations of  claim 1  further including pooling of investments from a number of investors that is sufficiently large in order to achieve a required investment distribution. 
   
   
       36 . The method for funding retained obligations of  claim 35  further including pooling of investments from at least ten investors. 
   
   
       37 . The method for funding retained obligations of  claim 1  further including pooling of investments from a number of investors that sufficiently small such that the investment is not considered a public offering. 
   
   
       38 . The method for funding retained obligations of  claim 37  further including pooling of investments from at most 500 investors. 
   
   
       39 . The method for funding retained obligations of  claim 1  further including ensuring that the holding of financial instruments of any single interest holder does not make up more than some predetermined percentage of the total investment. 
   
   
       40 . The method for funding retained obligations of  claim 39  further including investing in at least one financial instrument of an interest holder that is sufficiently small such that financial instruments of a single interest holder do not make up more than about fifteen percent (15%) of the total investment. 
   
   
       41 . The method for funding retained obligations of  claim 1  further including sharing any gain or loss among the investors, without regard to the source of the loss or gain. 
   
   
       42 . The method for funding retained obligations of  claim 41  further including sharing any gain or loss among the investors in accordance with the interests of the investor. 
   
   
       43 . The method for funding retained obligations of  claim 1  further including, after an initial period, allowing investors to change their investment on a periodic basis. 
   
   
       44 . The method for funding retained obligations of  claim 43  further including during an initial period of operation, not permitting investors to liquidate their entire position. 
   
   
       45 . The method for funding retained obligations of  claim 1  further including pooling of investments within a holding entity formed by at least one investor and the holding entity placing its assets into at least one investment vehicle. 
   
   
       46 . A method for funding retained obligations comprising:
 creating an investment vehicle;   funding the investment vehicle by investments from investors, the number of investors the being sufficiently large in order to achieve a required investment distribution while being sufficiently small to avoid being considered a public offering;   establishing a preference for investing in at least one financial instrument of interest holders of investors;   not requiring that the investment vehicle buy a specific amount of financial instruments of interest holders;   not requiring that the investment vehicle buy financial instruments of interest holders at any specific time;   not requiring that the investment vehicle guarantee that a contribution in the investment vehicle will equal an investment in financial instruments of an interest holder;   not tracing assets of an investor for purposes of measuring or allocating gain or loss; and   ensuring adequate diversification within the investment vehicle.   
   
   
       47 . The method for funding retained obligations of  claim 46  further wherein creating an investment vehicle comprises establishing at least one trust that is owned by at least one investor. 
   
   
       48 . The method for funding retained obligations of  claim 46  further wherein creating an investment vehicle comprises establishing an entity that qualifies as a domestic limited partnership and is owned by the investors. 
   
   
       49 . The method for funding retained obligations of  claim 46  further including a preference for investing in at least one financial instrument of an interest holder selected from a group comprising a policyholder of the investor, a direct or indirect parent of the investor, a subsidiary of the investor, a subsidiary or affiliate of the direct or indirect parent, a trust formed by the investor, an affiliate of the investor, and combinations thereof. 
   
   
       50 . The method for funding retained obligations of  claim 46  further including funding the investment vehicle by investment from a captive insurance company. 
   
   
       51 . The method for funding retained obligations of  claim 50  further including preference for investing in at least one financial instrument of an interest holder of the captive insurance company. 
   
   
       52 . The method for funding retained obligations of  claim 50  further including a parent of the captive insurance company capitalizing and owning the captive insurance company. 
   
   
       53 . The method for funding retained obligations of  claim 50  further including the captive insurance company insuring the property and casualty risks of the interest holder. 
   
   
       54 . The method for funding retained obligations of  claim 50  further including the captive insurance company insuring the property and casualty risks of subsidiaries or affiliates or both of the interest holder. 
   
   
       55 . The method for funding retained obligations of  claim 50  further including paying arm's length premiums to the captive insurance company for insurance. 
   
   
       56 . The method for funding retained obligations of  claim 50  further including the interest holder transferring sufficient independent, uncorrelated risks to the captive insurance company so that a risk distribution is present. 
   
   
       57 . The method for funding retained obligations of  claim 50  further including not offsetting a liability of an interest holder for at least one financial instrument issued against an investment of the interest holder in a captive insurance company in the financial statements of the interest holder. 
   
   
       58 . The method for funding retained obligations of  claim 50  further including neither the interest holder nor the investment vehicle consolidating for financial reporting purposes. 
   
   
       59 . The method for funding retained obligations of  claim 50  further including a parent of the captive insurance company forming both a captive insurance company and a subsidiary or subsidiaries. 
   
   
       60 . The method for funding retained obligations of  claim 50  further including a interest holder of the captive insurance company purchasing at least one policy of insurance from a commercial insurer and the commercial insurer investing in the investment vehicle. 
   
   
       61 . The method for funding retained obligations of  claim 46  further including not offsetting a liability of the interest holder for at least one financial instrument issued against an investment of the interest holder in a captive insurance company in the financial statements of the interest holder. 
   
   
       62 . The method for funding retained obligations of  claim 46  further including not offsetting a liability of the interest holder for at least one financial instrument issued against an investment of the captive insurance company in the investment vehicle in the financial statements of the interest holder. 
   
   
       63 . The method for funding retained obligations of  claim 46  further including funding the investment vehicle by investment from at least one Rabbi Trust. 
   
   
       64 . The method for funding retained obligations of  claim 46  further including funding the investment vehicle by investment from at least one voluntary employee benefit association. 
   
   
       65 . The method for funding retained obligations of  claim 46  further including funding the investment vehicle by investment from at least one deferred compensation plan. 
   
   
       66 . The method for funding retained obligations of  claim 46  further including investing in at least one financial instrument selected from the group comprising debt, equity, other financial instruments, and combinations thereof. 
   
   
       67 . The method for funding retained obligations of  claim 46  further including investing in debt of the interest holder of an investor. 
   
   
       68 . The method for funding retained obligations of  claim 67  further including investing in a highly rated debt instrument of an interest holder of an investor. 
   
   
       69 . The method for funding retained obligations of  claim 67  further including investing in short-term debt of the interest holder of an investor. 
   
   
       70 . The method for funding retained obligations of  claim 46  further including ensuring that the investment of the investment vehicle is not more risky than what it would otherwise be without the preference for the interest holders of the investors in the investment vehicle. 
   
   
       71 . The method for funding retained obligations of  claim 70  further including investing in an appropriately rated financial instrument. 
   
   
       72 . The method for funding retained obligations of  claim 46  further including ensuring that the investment vehicle is purchasing the financial instruments at an arm's length price and that the investment vehicle is seen to be in the business of trading financial instruments rather than in the financing business. 
   
   
       73 . The method for funding retained obligations of  claim 72  further including investing in at least one financial instrument of an interest holder on the same terms and conditions under which an unrelated third party can invest in the financial instrument. 
   
   
       74 . The method for finding retained obligations of  claim 46  further including ensuring that a market exists for the financial instruments so that the investment is liquid. 
   
   
       75 . The method for funding retained obligations of  claim 74  further including investing in at least one financial instrument of an interest holder in which at least one third party has also invested. 
   
   
       76 . The method for funding retained obligations of  claim 46  further including investing in at least one financial instrument of an entity unrelated to an investor. 
   
   
       77 . The method for finding retained obligations of  claim 46  further including investing in an entity that invests in at least one financial instrument of an interest holder of the investors. 
   
   
       78 . The method for finding retained obligations of  claim 46  further including purchasing at least one financial hedge. 
   
   
       79 . The method for finding retained obligations of  claim 78  further including purchasing at least one option to purchase at least one financial hedge. 
   
   
       80 . The method for finding retained obligations of  claim 46  further including pooling the investments from investors. 
   
   
       81 . The method for funding retained obligations of  claim 80  further including pooling of investments from a number of investors that is sufficiently large in order to achieve a required investment distribution. 
   
   
       82 . The method for funding retained obligations of  claim 81  further including pooling of investments from a number of investors that sufficiently small such that the investment is not considered a public offering. 
   
   
       83 . The method for funding retained obligations of  claim 46  further including ensuring the financial instruments of a single interest holder do not make up a significant portion of the total investment of the investment vehicle. 
   
   
       84 . The method for funding retained obligations of  claim 46  further including sharing any gain or loss among the investors, without regard to the source of the loss or gain. 
   
   
       85 . The method for finding retained obligations of  claim 84  further including sharing any gain or loss among the investors in accordance with the interests of the investor. 
   
   
       86 . The method for funding retained obligations of  claim 46  further including, after an initial period, allowing investors to change their investment on a periodic basis. 
   
   
       87 . The method for finding retained obligations of  claim 86  further including during an initial period of operation, not permitting investors to liquidate their entire position. 
   
   
       88 . The method for funding retained obligations of  claim 46  further including pooling of investments within a holding entity formed by at least one investor and the holding entity placing its assets into at least one investment vehicle. 
   
   
       89 . A method for funding retained obligations comprising:
 funding an investment vehicle by investment from at least two investors;   the investment vehicle having a preference for investing in at least one financial instrument of an interest holder of an investor;   the investment vehicle not tracing assets of an investor for purposes of measuring or allocating gain or loss; and   the financial instruments further having criteria selected from the group comprising:   ensuring that the investment of the investment vehicle is not more risky than what it would otherwise be without the preference for the interest holders of the investors in the investment vehicle;   ensuring that the investment vehicle is purchasing the financial instruments at an arm's length price and that the investment vehicle is seen to be in the business of trading financial instruments rather than in the financing business;   ensuring that a market exists for the financial instrument so that the investment is liquid; and   combinations thereof.   
   
   
       90 . The method for finding retained obligations of  claim 89  further including ensuring that the holding of financial instruments of a single interest holder does not make up a significant portion of the total investment of the investment vehicle. 
   
   
       91 . The method for funding retained obligations of  claim 89  further wherein funding the investment vehicle by investment from investors comprises establishing at least one trust that is owned by at least one investor. 
   
   
       92 . The method for funding retained obligations of  claim 89  further wherein funding the investment vehicle by investment from investors comprises establishing an entity that qualifies as a domestic limited partnership and is owned by the investors. 
   
   
       93 . The method for funding retained obligations of  claim 89  further including investing in at least one financial instrument of an interest holder selected from a group comprising a policyholder of the investor, a direct or indirect parent of the investor, a subsidiary of the investor, a subsidiary of the direct or indirect parent, a trust formed by the investor, affiliates of the investor, and combinations thereof. 
   
   
       94 . The method for funding retained obligations of  claim 89  further including funding the investment vehicle by investment from a captive insurance company. 
   
   
       95 . The method for funding retained obligations of  claim 89  further including funding the investment vehicle by investment from at least one Rabbi Trust. 
   
   
       96 . The method for funding retained obligations of  claim 89  further including funding the investment vehicle by investment from at least one voluntary employee benefit association. 
   
   
       97 . The method for funding retained obligations of  claim 89  further including funding the investment vehicle by investment from at least one deferred compensation plan. 
   
   
       98 . The method for funding retained obligations of  claim 89  further including investing in at least one financial instrument selected from the group comprising debt, equity, other financial instruments, and combinations thereof. 
   
   
       99 . The method for funding retained obligations of  claim 89  further including investing in debt of the interest holder of an investor. 
   
   
       100 . The method for funding retained obligations of  claim 99  further including investing in short-term debt of the interest holder of an investor. 
   
   
       101 . The method for funding retained obligations of  claim 89  further including ensuring that the investment of the investment vehicle is not more risky than what it would otherwise be without the preference for the interest holders of the investors in the investment vehicle by investing in an appropriately rated financial instrument. 
   
   
       102 . The method for funding retained obligations of  claim 89  further including ensuring that the investment vehicle is purchasing at least one financial instrument at an arm's length price and that the investment vehicle is seen to be in the business of trading financial instruments rather than in the financing business by investing in at least one financial instrument of an interest holder on the same terms and conditions under which an unrelated third party can invest in the financial instruments. 
   
   
       103 . The method for funding retained obligations of  claim 89  further including ensuring that a market exists for the financial instruments so that the investment is liquid by investing in financial instruments of an interest holder in which at least one third party has also invested in the issuance of such financial instruments. 
   
   
       104 . The method for finding retained obligations of  claim 89  further including investing in at least one financial instrument of an entity unrelated to an investor. 
   
   
       105 . The method for funding retained obligations of  claim 89  further including purchasing at least one financial hedge. 
   
   
       106 . The method for finding retained obligations of  claim 105  further including purchasing at least one option to purchase at least one financial hedge. 
   
   
       107 . The method for funding retained obligations of  claim 89  further including pooling the investments from investors 
   
   
       108 . The method for funding retained obligations of  claim 89  further including funding the investment vehicle by investments from a number of investors that is sufficiently large in order to achieve a required investment distribution. 
   
   
       109 . The method for funding retained obligations of  claim 89  further including funding the investment vehicle by investments from a number of investors that sufficiently small such that the investment is not considered a public offering. 
   
   
       110 . The method for funding retained obligations of  claim 89  further including investing in financial instruments of an interest holder in an amount that is sufficiently small to ensure adequate diversification. 
   
   
       111 . The method for funding retained obligations of  claim 89  further including sharing any gain or loss among the investors, without regard to the source of the loss or gain. 
   
   
       112 . The method for funding retained obligations of  claim 89  further including, after an initial period, allowing investors to change their investment on a periodic basis. 
   
   
       113 . The method for finding retained obligations of  claim 89  further including pooling of investments within a holding entity formed by at least one investor and the holding entity placing its assets into at least one investment vehicle. 
   
   
       114 . An investment vehicle comprising:
 funds provided by investment from at least two investors;   a business purpose for the investment vehicle;   the investment vehicle not created entirely to reduce taxes;   the investment vehicle not disregarded;   the investment vehicle not a conduit;   cash flow of the investment vehicle not circular;   the investment vehicle not violating partnership anti-abuse rules; and   the investment vehicle having a preference for an investment in at least one financial instrument of an interest holder of an investor.   
   
   
       115 . The investment vehicle of  claim 114  further comprising a pool of investments from the investors held in at least one trust that is owned by at least one investor. 
   
   
       116 . The investment vehicle of  claim 114  further comprising an entity that qualifies as a domestic limited partnership and is owned by the investors. 
   
   
       117 . The investment vehicle of  claim 114  further wherein the interest holder of an investor is selected from the group comprising a policyholder of the investor, a direct or indirect parent of the investor, a subsidiary of the investor, a subsidiary of the direct or indirect parent, a trust formed by the investor, affiliates of the investor, and combinations thereof. 
   
   
       118 . The investment vehicle of  claim 114  further wherein at least one investor comprises a captive insurance company. 
   
   
       119 . The investment vehicle of  claim 114  further wherein an investor comprises at least one Rabbi Trust. 
   
   
       120 . The investment vehicle of  claim 114  further wherein an investor comprises at least one voluntary employee benefits association. 
   
   
       121 . The investment vehicle of  claim 114  further wherein an investor comprises at least one deferred compensation plan. 
   
   
       122 . The investment vehicle of  claim 114  further wherein at least one financial instrument is selected from the group comprising debt, equity, other financial instruments, and combinations thereof. 
   
   
       123 . The investment vehicle of  claim 114  further wherein at least one financial instrument of an interest holder comprises debt of the interest holder of an investor. 
   
   
       124 . The investment vehicle of  claim 123  further wherein the financial instrument of an interest holder comprises short-term debt of the interest holder of an investor. 
   
   
       125 . The investment vehicle of  claim 114  further wherein the finds are provided to the investment vehicle directly by an investor. 
   
   
       126 . The investment vehicle of  claim 114  further wherein the funds are provided to the investment vehicle indirectly by an investor. 
   
   
       127 . The investment vehicle of  claim 114  further wherein the investment vehicle having a preference for an investment in a debt instrument of an interest holder of an investor. 
   
   
       128 . The investment vehicle of  claim 114  further wherein the financial instrument of an interest holder is appropriately rated and is purchased on the same terms and conditions under which an unrelated third party can purchase the financial instrument; and further wherein at least one third party has also purchased the financial instrument. 
   
   
       129 . The investment vehicle of  claim 114  further wherein the number of investors is sufficiently large in order to achieve a required investment distribution. 
   
   
       130 . The investment vehicle of  claim 114  further wherein the number of investors is sufficiently small such that the investment vehicle is not considered a public offering. 
   
   
       131 . The investment vehicle of  claim 114  further wherein a sufficiently small number of financial instruments of a single interest holder are purchased to ensure adequate diversification of the investment vehicle. 
   
   
       132 . The investment vehicle of  claim 114  further wherein the investments from investors are pooled. 
   
   
       133 . The investment vehicle of  claim 114  further wherein assets of the investment vehicle are held in a pool such that any gain or loss of the investment vehicle is shared among the investors, without regard to the source of the loss or gain. 
   
   
       134 . The investment vehicle of  claim 114  further wherein, after an initial period, investors are allowed to change their investment in the investment vehicle on a periodic basis. 
   
   
       135 . The investment vehicle of  claim 114  further including a holding entity formed by at least one investor into which investments are pooled, with the assets of the holding entity placed into at least one investment vehicle.